Hiring workers is a major source of liability for an organization, as employees can engage in misconduct or accuse the business of violating their rights. Employers must carefully comply with all applicable workplace regulations to avoid liability and lawsuits. Employees have the protection of wage laws that establish a minimum wage for hourly workers and entitle employees to overtime wages in certain circumstances.
Companies may seek to reduce wage obligations by paying employees on a salary basis. Many salaried workers are exempt employees, which means that overtime wage rules do not apply to them. A company can require that they put in additional hours beyond the standard 40-hour workweek without increasing what they receive in their paycheck.
Oftentimes, companies try to keep wages low while ensuring optimal productivity. Yet, those who receive lower salaries might soon be eligible for overtime pay even though they previously were not.
Federal exemption rules are about to change
The federal government has long maintained a minimum salary that a company must pay to legally exempt its workers from overtime rules. Since 2019, the minimum salary to make a worker ineligible for overtime pay was $35,568. That base salary is about to increase substantially.
As of July 1st, 2024, the minimum salary required to avoid paying an employee overtime increases to $43,888. The federal overtime exemption level increases again as of January 1st, 2025. Workers earning less than $58,656 in 2025 are potentially eligible for overtime pay.
Organizations can protect themselves from wage claim lawsuits related to these changes in one of two ways. The simplest solution may be to prohibit over time hours. By requiring that workers put in no more than 40 hours, companies can avoid overtime wage requirements without increasing what they pay their employees.
At organizations where overtime is necessary to ensure optimized company operations, increasing the wages of workers with relatively low salaries can be the most appropriate means of avoiding a wage lawsuit filed by a worker with a low salary. Proactive compliance with federal regulations can eliminate the possibility of embarrassing and costly employee lawsuits. Organizations that comply with changing overtime rules can avoid disputes with workers that could lead to litigation.
